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Important information and forward looking statement
This presentation should be considered with AIB’s Half-Yearly Financial Report 2016, Trading Update May 2016 and all other relevant market disclosures,copies of which can be found at the following link:
http://investorrelations.aib.ie
Important Information and forward-looking statements
AIB is 99.9% owned by the Irish State and therefore the limited free-float distorts trading and valuation of AIB shares.
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of AIB Group and certain of the plans and objectives of the Group. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as ‘aim’, ‘anticipate’, ‘target’, ‘ expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘may’, ‘could’, ‘will’, ‘seek’, ‘continue’, ‘should’, ‘assume’, or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group’s future financial position, capital structure, Government shareholding in the Group, income growth, loan losses, business strategy, projected costs, capital ratios, estimates of capital expenditures, and plans and objectives for future operations. Because such statements are inherently subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking information. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These are set out in the ‘Principal risks and uncertainties’ on pages 50 to 59 of the Annual Financial Report 2015 and on page 32 ‘Update on risk management and governance’ of the Half-Yearly Financial Report 2016. In addition to matters relating to the Group’s business, future performance will be impacted by Irish, UK and wider European and global economic and financial market considerations. Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made. The Group cautions that the list of important factors on pages 50 to 59 of the Annual Financial Report 2015 and on page 32 of the Half-Yearly Financial Report 2016 is not exhaustive. Investors and others should carefully consider the foregoing factors and other uncertainties and events when making an investment decision based on any forward-looking statement.
2
H1 2016 in summary
Market leading franchise with customer first strategy and investment in digital and innovation driving the commercial agenda
Robust capital generation; further payment of €1.8bn to the State
Well positioned for future challenges and opportunities in a growing economy
Strong financial performance; ongoing sustainable profitability, capital generation and further improvement in asset quality
4
Profitable and strong capital generationH1 2016 financial highlights
€1.0bn
€1.2bn in H1 2015Profit before tax
€11.3bn or €5.9bn net(3)
€1.8bn reduction on Dec ‘15Impaired loans
2.08%
16bps increase in H1 2016Net Interest Margin(1)
13.3%
30bps higher than Dec’15CET1 ratio(2)
• Strong sustainable underlying profit• Enhanced by provision writebacks and one-offs
(1) Excludes Eligible Liabilities Guarantee (ELG)(2) Fully loaded CET1 ratio(3) Net of specific provisions(4) Contingent Capital Notes
• Positive upward NIM trajectory to 2.08% from 1.92%
• Stable asset yields; lower funding costs
• Continued reduction in impaired loans• Primary restructuring period concluding
• Strong capital ratios • Comfortably above regulatory requirements• Generating significant capital; payment of €1.8bn
to the State on the maturity of the CoCo(4)
5
100
120
140
160
180
200
220
Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015
% Household debt to disposable income
5.04.5
4.0
4.7
3.53.0
2016(f) 2017 (f) 2018 (f)
ROI GDP (% change in real terms) forecasts pre- and post- Brexitreferendum
Pre-Brexit referendum Post-Brexit referendum
9.5
7.97.2
6.7
2015 2016 (f) 2017 (f) 2018 (f)
Average Unemployment rate (%)
Improving economy in H1 2016; challenges remainGrowth momentum despite Brexit Unemployment rate falling, strong jobs growth
AIB Economic Research UnitAIB Economic Research Unit
0
20
40
60
80
100
0
10
20
30
40
50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mortgage Drawdowns € bn (LHS)
Housing completions '000s (RHS)
Household debt at 2005 levels Housing completions recovering from record lows
Central Bank of Ireland and Central Statistics office Banking & Payments Federation Ireland & Central Statistics office
6
Customer first strategy driving the commercial agenda
Leading omni-channel and digital offering
• Largest distribution network in Ireland supported by digital innovation
• Reconfiguration of the physical franchise into ‘Local Markets Model’
Strategic multi-brand and proposition approach
COMPLETE CONSISTENT CONNECTED
206 Branches
20 Business Centres
CampusLocations
71 Locations
1,100 An Post
Locations
Tablet Banking
Internet Banking
Mobile App
Pillar bank Challenger brands GB – niche player
Customer First Talent & CultureSimple & EfficientRisk & Capital Management
38%
21%
34%
44%
26%
45%
PersonalCurrent
Accounts
Personal loans Mortgages Business CurrentAccounts
Leasing Main BusinessOverdraft
Leading market shares in Ireland
#1#11
#1 #1
#12#1
# Market share position*
*Source: Ipsos MRBI , AIB Market Pulse Tracker Q3 2015 – Q2 2016 rolled
(1) Amongst banks(2) Main Business Leasing Agreement
7
Investment delivering on strategic priorities
Ongoing investment in Mobile 2.0
3-hour end to end Personal Loan
application
Increase in digitally initiated requests
€408m investment
spend to date
Significant investment in analytics
Improving resilience and agility
Regulation and sustainment
Prioritising and improving customer
journeys
Transforming Customer Experience
Customer First Talent & CultureSimple & EfficientRisk & Capital Management
Focused Investment of €870m (2015- 2017)
Delivering tangible outcomes
• Over 1 million online users
• 578,000 active mobile users
• 95% of customer transactions are automated
• 76% of personal loan applications now through digital channels
• Market share of personal loans increased to 21% from 15%
• 53% of all credit card sales now through digital channels
Increasing Net Promoter Scores
AIB NPS Q4 2014
AIB NPS Q2 2016
16 38
48-hour approval for SME lending up to €30k
Digital forecourt finance capability
8
Strong franchise in Ireland with retail and business focus
AIB UK – Niche, low risk business
Group & International
• Sector specific and niche service offering to OMBs(3) in GB; targeting a core personal market with selective business customers in NI
• Continuing to develop UK strategy
• Brexit likely to bring economic challenges
• Central control and support functions• Wholesale treasury activities• Corporate business in Europe and USA
54
10
3
Gross Loans
Operating Contribution (1)
Total: € 67bn
Total: € 0.8bn
751
84
AIB Ireland AIB UK Group & International(2)
€bn
€m
AIB Ireland – well positioned for growth
• Ireland’s leading franchise bank with continuous development of customer propositions
• Omni-channel distribution with No.1 physical presence and highest digital adoption
• Largest mortgage player with multi-brand approach and market leading pricing
• Product and delivery innovation driving market share gains in personal lending
• No.1 bank for SMEs and start-up businesses
• Sector approach to business and corporate banking delivering strong market shares
Segment overview
(1) Operating contribution before exceptional items(2) Group & International operating contribution -€82m(3) Owner managed businesses
9
Strategic propositions supporting lending growth
Increase in new lending year on year
2.22.4
1.21.0
0.4 0.5
H1 2015 H1 2016
Drawdowns
RoI UK Group & Intl
3.93.8
€bn
€6.1bn new lending approvals Drawdowns to approval rate of 64%
Momentum across key sectors
0.75 0.77
H1 2015 H1 2016
Mortgage Lending€bn
0.5 0.6
1.11.2
H1 2015 H1 2016
Business and Corporate lending
Business Corporate
€bn
1.6
1.8
12%0.9
0.8
H1 2015 H1 2016
UK lending£bn
-8%
0.250.32
H1 2015 H1 2016
Personal Lending€bn
28%2%
10
Progress on resolving legacy customer issues
• €18bn reduction in impaired loans to €11bn since Dec 2013
• Case by case restructuring of personal and business customers in financial difficulty
• Implementing sustainable solutions for customers who engage
• c. 37,000 forbearance solutions provided to mortgage customers
• €0.8bn impaired mortgages in ‘probationary period’
• Owner occupier arrears > 90 days past due at 5.8% significantly below industry average at 8.0%
• Primary restructuring period concluding
29
22
1311
Dec-13 Dec-14 Dec-15 Jun-16
€bn
55%
51%
%
Specific Provisions / Impaired Loan Coverage Ratio
47%
Impaired Loans
47%
- 62%
Delivering for customers in financial difficulty
Overall Total Arrears* Owner Occupier Arrears*
Early and late arrears
* by number of mortgage accounts in the six months to June 2016
- 8% - 9% Progress on industry tracker mortgage examination
• Ongoing mortgage review with independent external oversight on the process
• Provision created in December 2015
• Shortly commencing initial customer communication
Early and late arrears
11
Substantial payments to the State Further capital repaid – €6.5bn in total payments to the State
€1.8bn paid in July 2016
• Maturity of €1.6bn Contingent Capital Notes (CoCo)
• €160m final coupon paid on the CoCo
€1.6bn of capital repaid in July
2016
€3.2bn paid in fees, coupons, dividends and
levies
Total payments of €6.5bn to
date
€1.7bn paid in Dec 2015
Well positioned to repay further capital to the State and return to private ownership over time
Regulatory approval for €3.5bn payments to State reflects strength of capital base
12
Summary
Sustainable profitable with strong capital base; delivering capital to the State
Executing a clear strategy to deliver enhanced customer experience, improved efficiency and sustainable value accretion
Leading market shares and growing new lending through customer first strategic priorities and a differentiated business model enhanced by digital innovation
Continued reduction in impaired loans and improvement in asset quality
Net interest margin
Return on equityCapitalCost income
ratio
Focused on delivering sustainable performance through key levers
13
Financial highlightsKey performance metrics in line with expectations
Sustainable underlying profitability and positive net interest margin trajectory
Stable performing loan book in H1 driven by new lending, redemptions, restructuring and FX impact
Reduction in impaired loans; primary restructuring period concluding
Capital generative, strong capital stack and ratios
15
Income StatementSustainable underlying profit of €0.5bn
• Operating income of €1.2bn (H1 2015 €1.3bn)
• net interest income marginally higher
• net interest margin up 16bps to 2.08%; continued positive NIM trajectory
• underlying other income stable excluding one-off benefits
• Operating expenses up €31m (+5%) due to planned business investment initiatives and wage inflation partially offset by lower headcount
• Net credit provision writebacks of €211m includes €103m new to impaired charge
• primary restructuring period concluding
• ROE of 13.6% enhanced by net credit provision writebacks and one-off items
(1) Excludes exceptional items and bank levies and regulatory fees(2) ROE: Profit attributable to ordinary shareholders after deduction of half yearly dividend on AT1
as % of average ordinary shareholders’ equity (excludes AT1)
17
Summary income statement (€m) HY 2016 HY 2015 Change %
Net interest income 945 940 1%
Other income 295 409 -28%
Total operating income 1,240 1,349 -8%
Total operating expenses (1) (677) (646) 5%
Operating profit before provisions 563 703 -20%
Bank levies and regulatory fees (48) (2)
Provisions 214 543
Associated undertakings & profit on sale 24 17
Operating profit before exceptionals 753 1,261
Exceptional items 264 (26)
Profit before tax from continuing operations 1,017 1,235
Metrics HY 2016 HY 2015
Net interest margin (excluding ELG) 2.08% 1.92%
Cost income ratio (1) 55% 48%
Return on average ordinary shareholders' equity 13.6% (2) 16.8%
Return on assets 1.7% 1.6%
Average balance sheetFurther NIM expansion due to lower funding costs and stable asset yields
(1) Net interest margin excluding ELG
• NIM(1) of 2.08%
• Maintaining spread between customer loans at 3.32% (H1 2015 3.45%) and deposits 0.70% (H1 2015 1.06%)
• NIM will continue to expand
• Maturity of €1.6bn CoCo
• NAMA Senior Bond redemptions
• Reducing AFS portfolio; average yield including HTM of 2.40% (H1 2015: 2.65%)
• Average interest earning assets decreased by €8bn to €92bn
• NAMA senior bond redemptions
• Lower net loans from redemptions and restructuring
• Positive NIM trajectory and on track for further expansion
18
Average
balanceInterest
Average
Rate
Average
balanceInterest
Average
Rate
€m €m % €m €m %
Assets
Loans and receivables to customers 62,767 1,039 3.32 65,129 1,115 3.45
NAMA senior bonds 4,529 7 0.32 8,683 20 0.46
Financial investments AFS 15,168 158 2.09 19,625 258 2.65
Finanical investments HTM 3,451 65 3.79 0 0 0
Other interest earning assets 6,215 12 0.37 7,200 11 0.32
Net interest on swaps 0 60 38
Average interest earning assets 92,130 1,341 2.92 100,637 1,442 2.89
Non interest earning assets 8,023 7,632
Total assets 100,153 1,341 108,269 1,442
Liabilities and shareholders’ equity
Deposits by banks 10,951 (6) (0.10) 16,944 5 0.06
Customer accounts 39,686 140 0.70 44,808 236 1.06
Subordinated liabilities 2,348 162 13.85 1,480 136 18.54
Other debt issued 7,684 91 2.36 7,466 108 2.93
Average interest earning liabilities 60,669 387 1.28 70,698 485 1.38
Non interest earning liabilities 27,114 25,726
Shareholders’ equity 12,370 11,845
Total l iabilities and shareholders' equity 100,153 387 108,269 485
Net interest income excluding ELG (1) 954 2.08 957 1.92
ELG (9) (0.02) (17) (0.04)
Net interest income including ELG 945 2.06 940 1.88
Half year ended 30 June 2015Half year ended 30 June 2016
207
103
99
Other Income€m
19330
72
Fees &Commissions
Other BusinessIncome
Other Items
Other incomeStable customer fees and commissions; lower treasury income
• Other income €295m (H1 2015 €409m)
• Stable net fee and commission income of €193m (H1 2015 €207m)
• Increased customer activity in cards and wealth management in Ireland
• - €14m impact primarily due to lower card interchange fees and FX impact
• Other business income €30m (H1 2015 €103m); lower in H1 2016 due to valuations on long term customer derivative positions
• Other items €72m (H1 2015 €99m) includes:
- AFS disposals net gains of €22m (H1 2015 €51m)
- other gains of €50m, mainly due to cashflows on previously restructured loans
H1 2015 H1 2016
19
Other income (€m) HY 2016 HY 2015 Change %
Net fee and commission income 193 207 -7%
Other Business Income 30 103
Business Income 223 310
Gains on disposal of AFS securities 22 51
Re-estimation of timing of cashflows on NAMA bonds 10 4
Settlements and other gains 40 44
Other items 72 99
Total other income 295 409 -28%
CostsContinued focus and management of cost while progressing on strategic investment programme
• Operating expenses €677m +5%
Factors impacting cost
• Staff costs flat and incorporate wage inflation; Outsourcing for future resilience
• Investing in strategic initiatives for growth and efficiency
• Continued investment in loan restructuring operations
• Increasing burden of regulatory compliance
Investment in strategic programmes
• Focus on customer, digital innovation and information technology
• total investment programme €870m (2015 to 2017)
• €408m(3) invested to date to simplify processes, improve efficiency and transform the customer experience
Disciplined cost management
• Significant reduction in cost base since 2012
• Medium term target of sustainable cost income ratio of <50%
356 359
290 318
646 677
H1, 2015 H1, 2016
Staff Costs Other Costs
€m Operating expenses(1)
10,59910,095
H1, 2015 H1, 2016
€m Full time equivalent - employees(2)
(1) Excluding exceptional items & bank levies(2) Period end (3) P&L impact of this investment spend is reflected in the P&L in operating expenses and in
exceptional items for certain strategic elements.
20
P&L - Other itemsExceptional benefits and provision writebacks partially offset by regulatory fees and levies
• Net credit provision writeback of €211m(1) mainly due to case by case restructuring of customers in difficulty
• primary restructuring period concluding - higher numbers of residual complex cases at lower value
• €103m (30bps) new to impaired charge compared to €163m (43bps) in H1 2015, due to ongoing slowing pace of migration in an improving economy
• €214m net writeback of specific provisions
• €100m IBNR release
• Provision writebacks expected to be lower in 2016 versus 2015
• Bank levies and regulatory fees €48m
• Bank Levy in H2, estimated €60m
• Profit on Visa Europe transaction €272m
• €188m cash
• €19m deferred consideration
• €65m fair value of preferred stock in Visa Inc
(1) Excludes non-credit provision writebacks of €3m provision
Other PL items (€m) HY 2016 HY 2015
Operating profit before provisions 563 703
Bank levies and regulatory fees (48) (2)
Provisions 214 543
Associated undertakings & profit on sale 24 17
Operating profit before exceptionals 753 1,261
Total exceptional items (€) HY 2016 HY 2015
Operating profit before exceptionals 753 1,261
Restitution & restructuring expenses (20) (12)
Gain on transfer of financial instruments 16 7
Profit on disposal of Visa Europe 272 0
Termination benefits (3) (13)
Other exceptional items (1) (8)
Profit before taxation 1,017 1,235
21
Balance sheetEfficient balance sheet management and strong capital ratios; well positioned for growth
Assets
• Net loans €61.1bn (Dec €63.2bn)
• Stable performing loans, continued progress on restructuring and growth in new lending
• new lending drawdowns of €3.9bn (H1 2015 €3.8bn) with AIB Ireland €2.4bn up 8%
• redemptions €4.7bn
• fx impact of €1.3bn
• Ongoing NAMA senior bond redemptions of €2.4bn since Dec 2015
Liabilities
• Customer accounts of €61.6bn (H1 2015 €63.4bn) • growing retail resources base; positive mix with
increased demand deposits and current accounts (+€1.7bn) and lower term deposits (-€1.2bn)
• reduction in Corporate deposits of €0.8bn; focus on strategic pricing and liquidity management
• fx impact of €1.5bn
• Equity increase €0.2bn primarily due to• profit for H1 2016 €0.8bn
• net pension deficit increase of €0.5bn
Balance Sheet €bn Jun-16 Dec-15 % Change
Gross loans to customers 67.0 70.1 -4%
Provisions (5.9) (6.9) -14%
Net loans to customers 61.1 63.2 -3%
Financial investment AFS 14.9 16.5 -10%
Financial Investemnt HTM 3.4 3.5 -3%
NAMA senior bonds 3.2 5.6 -43%
Other assets 14.8 14.3 3%
Total assets 97.4 103.1 -6%
Customer accounts 61.6 63.4 -3%
Monetary Authority funding 2.5 2.9 -14%
Other market funding 5.6 11.0 -49%
Debt securities in issue 7.9 7.0 13%
Other liabilities 7.5 6.7 12%
Total l iabilities 85.1 91.0 -6%
Equity 12.3 12.1 2%
Total l iabilities & equity 97.4 103.1 -6%
Key Funding Metrics Jun-16 Dec-15
Loan deposit ratio (LDR) 99% 100%
Liquidity coverage ratio (LCR) 122% 116%
Net stable funding ratio (NSFR) 115% 111%
Transitional CET1 ratio 16.5% 15.9%
Fully loaded CET1 ratio 13.3% 13.0%
€bn
Risk weighted assets (transitional) 56.5 58.5
23
Customer loansNew lending up 2% to €3.9bn, performing loan book stable
• Performing loan book stable on constant currency basis
• New lending of €3.9bn, up 2% compared to June 15
• AIB Ireland new lending, up 8% to €2.4bn
• new lending at higher grades and maintained margins
• growing market share in key sectors against backdrop of market challenges - constrained Irish mortgage market and increased economic uncertainty in UK
• given Brexit, cautious outlook for new lending for remainder of year
• Redemptions higher than new lending as deleveraging continues
• €0.7bn returned to performing status from restructuring activity
70.1
57.0
13.1
67.0
55.7
11.3
Gross Loans Performing Loans Impaired Loans
Loan book movements
Jan-16 Jun-16
€bn
(1) includes non contractual writeoffs
€1.3bn FX impact
Customer loans (€bn) Performing loans Impaired loans Gross loans Specific provisions IBNR provisions Net loans
Opening balance (1 January 2016) 57.0 13.1 70.1 (6.2) (0.7) 63.2
New lending volumes 3.9 0.0 3.9 0.0 0.0 3.9
New impaired loans (0.3) 0.3 0.0 (0.2) 0.0 (0.2)
Restructures and writeoffs (1) 0.7 (1.3) (0.6) 0.7 0.0 0.1
Redemptions of existing loans (4.2) (0.5) (4.7) 0.0 0.0 (4.7)
Foreign exchange movements (1.3) (0.2) (1.5) 0.2 0.0 (1.3)
Other movements (0.1) (0.1) (0.2) 0.2 0.1 0.1
Closing balance (30 June 2016) 55.7 11.3 67.0 (5.3) (0.6) 61.1
24
Customer loansCorporate & SME driving new lending growth
€30.5bn55%
€2.7bn5%
€6.9bn12% €15.7bn
28%
Residential Mortgages
Other Personal
Property & construction
Corporate & SME (ex.Property)
June 2016 – Performing loans €55.7bn
€0.8bn21%
€0.4bn10%
€0.7bn18%
€2.0bn51%
Residential Mortgages
Other Personal
Property & construction
Corporate & SME (ex.Property)
June 2016 – New lending €3.9bn
• Mortgages 55% of total performing loans
• Corporate & SME (ex. property) 51% of new lending
• New lending across ROI personal, corporate & SME portfolios exceeding or matching redemptions
• Positioned for increase in mortgage market activity
25
Jun-16
€m
Loans and receivables to customers 35,742 3,319 10,475 17,550 67,086
Impaired 5,263 639 3,530 1,833 11,265
Balance sheet provisions (specific + IBNR) 2,162 454 2,097 1,191 5,904
Specific provisions / impaired loans (%) 37% 64% 56% 55% 47%
Total provisions / total loans (%) 6% 14% 20% 7% 9%
Dec-15
€m
Loans and receivables to customers 36,818 3,512 11,532 18,301 70,163
Impaired 5,966 698 4,308 2,113 13,085
Balance sheet provisions (specific + IBNR) 2,322 535 2,649 1,326 6,832
Specific provisions / impaired loans (%) 34% 70% 57% 55% 47%
Total provisions / total loans (%) 6% 15% 23% 7% 10%
Year on year movements
€m
Impaired (703) (59) (778) (280) (1,820)
Balance sheet provisions (specific + IBNR) (160) (81) (552) (135) (928)
Total
Property and
ConstructionOther Personal Total
Residential
Mortgages
Residential
Mortgages
Other PersonalProperty and
Construction
Non-property
business
lending
Non-property
business
lending
Residential
MortgagesOther Personal
Property and
Construction
Non-property
business
lending
Total
Asset qualityContinued progress as impaired loans reduce across all sectors
Impaired loans net of specific provisions
€5.9n
Impaired loans net of specific provisions
€6.9bn
26
Balance sheet provisionsWorking well within provision stock while maintaining coverage
(1) Provision coverage = Specific Provisions / Impaired loans
47%(1)
coverage
47% coverage
Balance sheet provisions movement (€m)Residential
Mortgages
Other
Personal
Property &
construction
Non-
property
business
Total
Specific 2,045 486 2,475 1,152 6,158
IBNR 277 49 174 174 674
Balance sheet provisions 2,322 535 2,649 1,326 6,832
Specific 1 -32 -71 -9 -111
IBNR -64 -4 -40 8 -100
Total -63 -36 -111 -1 -211
Total -97 -45 -441 -134 -717
Specific 1,950 409 1,965 1,013 5,337
IBNR 212 45 132 178 567
Balance sheet provisions 2,162 454 2,097 1,191 5,904
Opening Balance sheet provisions 1 Jan 2016
Income statement - credit provision charge/writebacks
Balance sheet provisions - amounts written off / other
Closing Balance sheet provisions 30 June 2016
27
Financial investments€18.3bn portfolio of Financial investments including €3.4bn as HTM
5.4
0.3
1.2 1.20.6
4.7
0.30.9 1
0.5
IrishGovernment
Securities
France Italy Spain Rest of World
AFS - Components of Government securities
Dec 2015 June 2016
3.5
8.7
2
4.6
3.4
7.4
1.8
4.7
Held to Maturity GovernmentSecurities
Supranational Banksand Gov agencies
Euro Bank Securities
Key components of AFS - Debt Securities(1)
Dec 2015 June 2016
€bn €bn
AFS and HTM - Debt Securities:
• €14.4bn debt securities
• Net gains from disposal of AFS debt securities in H1 2016: €22m
• Average yield on AFS and HTM of 2.40% (H1 2015 2.65%)
• Declining yield over time
• c. 75% of the book maturing < 5yrs
• Unrealised gains on AFS debt securities of c. €1.0bn
• Reduction of AFS in line with expected LCR requirements
AFS - Equity Securities(2):
• Equity securities available for sale €0.5bn decreased €0.2bn following Visa Europe transaction
• Unrealised gains on AFS equity securities of c. €0.4bn
(1) Excludes NAMA senior bonds of c. €3.2bn(2) Equity securities include NAMA subordinated bonds and Visa Inc preferred stock
28
Funding structureNormal market participant
• Customer deposits
• 67% of total funding
• ongoing stable source of funds
• LDR ratio 99%
• Wholesale funding
• 7 year AIB Mortgage Banks ACS issuance €1bn
• LCR 122% (minimum 70%, rising to 100% by 1 Jan 18)
• NSFR 115% (NSFR scheduled to be introduced in Jan 18)
• MREL
• discussions ongoing with the Resolution authorities around MREL indicative requirement
12.1 12.3
2.3 2.4
5.4
6.4
1.61.6
13.98.0
Dec 2015 June 2016
Equity* LT2 ACS / ABS / CP Senior Debt Deposits by Banks
€bn
Wholesale Funding & Capital
Customer Accounts
Total Funding
98.7 92.3
63.4 61.6
*Equity includes AT1MREL: Minimum required eligible liabilities
Key Funding Metrics Jun-16 Dec-15
Loan deposit ratio (LDR) 99% 100%
Liquidity coverage ratio (LCR) 122% 116%
Net stable funding ratio (NSFR) 115% 111%
30
Capital ratiosStrong capital base with fully loaded CET 1 of 13.3% - normalised capital stack
• Capital accretive
• profit after tax €0.8bn
• offset by pension deficit increase €0.5bn
• Reorganised capital stack
• LT2 €750m and AT1 €500m issuances December 2015
• CoCo €1.6bn maturing July 2016
• total capital on a fully loaded basis 15.7% (transitional 19.2%)
• RWA €56.5bn; reduction of €2bn primarily due to
• credit risk decreased by €3bn due to restructuring activity, net redemptions and FX impact €1.4bn
• operational risk up €0.7bn due to higher average 3 year income
• EBA stress test – results on 29 July 2016
• static balance sheet at December 2015
• benchmark approach
• regulatory approved return of €1.7bn in December 2015 and €1.8bn to be paid on CoCo maturity to State
The capital position as at 30 June 2016 as outlined above does not include any deduction for future dividends on ordinary shares
15.913.0
16.513.3
Transitional CET1 Fully Loaded CET1
Dec-15 Jun-16
%
= Total Capital %
Capital ratios
19.2 15.718.9 15.5
31
Risk Weighted Assets (€m) 30-Jun-16 31-Dec-15 Movement
Credit risk 50,574 53,596 (3,022)
Market risk 631 457 174
Operational Risk 3,874 3,139 735
CVA/Other 1,449 1,357 92
Total Risk Weighted Assets 56,528 58,549 (2,021)
AIB Group - RWA (€m) (Transitional)
Normalised and well positionedCapital repayment facilitated by progress and momentum
• Strengthened and simplified capital structure
• Sustainable profitability
• Path to normalised balance sheet
• Normalised funding market access
• Delivering a clear and focused strategy
€6.5bn of payments to the State
Shareholder value creation
32
Criticised loans and definitions
28.9
22.2
13.1 11.2
6.1
6.6
7.47.2(1)
6.8
5.2
4.33.7
Dec-13 Dec-14 Dec-15 Jun-16
Credit profile – criticised loans
Impaired Vulnerable Watch
(1) Includes upgrades from impaired as well as downgrades from watch
Watch The credit is exhibiting weakness but with the expectation that existing debt can be fully repaid from normal cash flows.
Vulnerable Credit where repayment is in jeopardy from normal cash flows and may be dependent on other sources.
Impaired A loan is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact such that the present value of estimated future cash flows is less than the current carrying value of the financial asset or group of assets and requires an impairment provision to be recognised in the income statement.
€bn
34
Improving asset quality
35
€m Ireland UK Group &
IntlTotal Ireland UK
Group &
IntlTotal
Res identia l mortgages 33,765 1,977 0 35,742 34,456 2,362 0 36,818
of which: owner-occupier 28,547 1,715 0 30,262 28,880 2,048 0 30,928
of which: buy-to-let 5,218 262 0 5,480 5,576 314 0 5,890
Other personal 3,026 293 0 3,319 3,156 356 0 3,512
Property and onstruction 7,559 2,884 32 10,475 8,055 3,443 34 11,532
Non-property bus iness lending 10,076 4,944 2,530 17,550 10,223 5,292 2,786 18,301
Total 54,426 10,098 2,562 67,086 55,890 11,453 2,820 70,163
Impaired loans 9,927 1,297 41 11,265 11,371 1,668 46 13,085
Balance sheet provis ions 5,028 845 31 5,904 5,705 1,098 29 6,832
of which: Speci fic 4,536 781 20 5,337 5,109 1,027 22 6,158
of which: IBNR 492 64 11 567 596 71 7 674
Speci fic provis ions / impaired loans 46% 60% 49% 47% 45% 62% 48% 47%
Net Loans 49,398 9,253 2,531 61,182 50,185 10,355 2,791 63,331
Jun-16 Dec-15
Balance sheet provisions by segment
Balance sheet provisions movement (€m) Ireland UK Group &
IntlTotal
Specific 5,109 1,027 22 6,158
IBNR 596 71 7 674
Balance sheet provisions 5,705 1,098 29 6,832
Specific -100 -18 7 -111
IBNR -104 4 -100
Total -204 -18 11 -211
Total -473 -235 -9 -717
Specific 4,536 781 20 5,337
IBNR 492 64 11 567
Balance sheet provisions 5,028 845 31 5,904
Income statement - credit provision charge/writebacks
Balance sheet provisions - amounts written off / other
Opening Balance sheet provisions 1 Jan 2016
Closing Balance sheet provisions 30 June 2016
36
ROI residential mortgages – arrears significantly lower
322
66
June-15 June-16
Impairment writeback€m
7.15.7 5.0
June-15 Dec-15 June-16
31%
€bn
%
Specific Provisions / Impaired Loan Coverage Ratio
34%
Impaired Loans • 85% of the RoI mortgage portfolio is owner occupier and 15% is buy to let
• Arrears levels down 8%(1) ytd 2016 due to restructuring activity and improving economic conditions
• Arrears owner-occupier down 9% ytd 2016
• Arrears buy-to-let down 6% ytd 2016
• Impaired loans down €0.7bn since Dec ’15 to €5.0bn mainly due to restructuring, write-offs and repayments through customer asset sales
• c. €0.8bn of forborne mortgages in ‘probationary period’
85%
15%
Owner-occupier
Buy-to-let
ROI Mortgage Portfolio – June 2016
36%
53%
11%
Tracker Variable Fixed
€33.8bn
37%
€bn
(1) Arrears by no of accounts
37
Other personal
8
36
June - 15 June - 16
Impairment writeback€m
0.90.7
0.6
June - 15 Dec - 15 June - 16
69%
€bn
%
Specific Provisions / Impaired Loan Coverage Ratio
70%
Impaired Loans • Portfolio comprises €2.5bn loans and overdrafts and €0.8bn in credit card facilities
• Increase in new lending due to expanded product and proposition offering in an improved economic environment offset by restructuring and redemptions; total portfolio reduced by €0.2bn since Dec ‘15 to €3.3bn
• Slight decrease in specific provision cover 70% to 64%
66%4%
11%
19%
Satisfactory Watch Vulnerable Impaired
Personal Loan Portfolio – June 2015
€3.3bn
64%
€bn
38
Property & construction
99
111
June - 15 June - 16
Impairment writeback€m
6.7
4.33.5
June - 15 Dec - 15 June - 16
60%
€bn
%
Specific Provisions / Impaired Loan Coverage Ratio
57%
Impaired Loans
• Overall portfolio has reduced by €1bn (9%) since Dec’ 15
• €0.6bn due to restructuring activity, write-offs, amortisations and repayments
• €0.4bn due to fx impact
• Investment Property (75% of the total portfolio) reduced by €0.3bn to €7.8bn due to restructuring, asset sales and repayment of debt
• €1.9bn of which is in the UK
• Impaired loans reduced by €0.8bn to €3.5bn in H1 2016
• Specific provision cover reduced from 57% to 56% to June 2016
75%
19%
4% 2%
Investment Land & Development
Contractors Housing Associations
Property & Construction Portfolio – June 2015
€10.5bn
56%
€bn
39
Non-property business
110
1
June - 15 June - 16
Impairment writeback€m
3.0
2.1 1.8
June - 15 Dec - 15 June - 16
54%
€bn
%
Specific Provisions / Impaired Loan Coverage Ratio
55%
Impaired Loans
• Portfolio comprises Corporate and SME lending
• 57% in Ireland and 28% in the UK
• 4% reduction year to date reflecting new lending offset by repayments and fx impact
• Performing loans increased to 90% of the portfolio (Dec 15: 88%)
• upward grade migration reflecting improved economic conditions
• Impaired loans reduced by €0.3bn to €1.8bn in June 2016
• Specific provision cover remained stable at 55%
10%
16%
15%33%
26%
Agriculture
Hotels & LicensedPremises
Retail/Wholesale/OtherDistribution
Other Services
Other
Non-property business portfolio – June 2016
€17.6bn
55%
€bn
40
ROI Mortgages – stock of forbearance
Forbearance type by mortgage Number Balance
(€m)Number
Balance
(€m)Number
Balance
(€m)Number
Balance
(€m)
Interest only 2,834 525 1,128 228 3,338 629 1,448 292
Reduced payment (greater than interest only) 1,154 270 643 151 1,400 315 781 181
Payment moratorium 553 85 237 35 682 95 314 44
Fundamental restructure 1,161 176 179 29 1,184 185 99 16
Arrears capitalisation 19,166 2,770 8,044 1,261 18,854 2,779 9,279 1,475
Term extension 5,250 591 531 74 5,781 638 582 73
Split mortgages 3,031 470 904 134 2,902 455 1,183 179
Voluntary sale for loss 770 49 342 36 693 48 348 37
Low fixed interest rate 1,424 225 164 29 1,250 197 109 20
Positive equity solution 1,399 153 98 10 1,240 136 99 11
Other 15 3 - 0 16 4 0 0
Total 36,757 5,317 12,270 1,987 37,340 5,481 14,242 2,328
June 2016 - Totalof which: loans > 90 days
in arrears and/or impairedJune 2016 - Total
of which: loans > 90 days
in arrears and/or impaired
• Delivering sustainable long term solutions to mortgage customers
– ongoing reduction of interest only forbearance
• Following restructure, loans are reported as impaired for a further 12 months (probationary period)
– c. €0.8bn of forborne mortgages are in ‘probationary period’
– c. €0.3bn reduction in forborne >90 days in arrears and/or impaired loans in the period
41
Non-mortgage – stock of forbearance
Other PersonalProperty and
construction
Non-property
business
lending
Other PersonalProperty and
construction
Non-property
business
lending
Balance Balance Balance Total Balance Balance Balance Total
Forbearance Type by Non-Mortgage €m €m €m €m €m €m €m €m
Interest only 65 177 200 442 71 203 188 462
Reduced payment (greater than interest only) 12 58 41 111 14 38 37 89
Payment moratorium 76 6 13 95 51 5 14 70
Arrears capitalisation 20 43 42 105 23 43 64 130
Term extension 143 198 194 535 123 207 154 484
Fundamental restructure 53 911 532 1496 49 1089 498 1636
Restructure 293 599 609 1501 304 556 617 1477
Other 9 93 88 190 15 169 195 379
Total 671 2,085 1,719 4,475 650 2,310 1,767 4,727
Jun-16 Dec-15
• Non-mortgage forborne loans of €4.5bn at June 2016
– mainly forborne loans in property and construction sector
• €1.7bn of ‘fundamental restructures’ (including €0.2bn BTL mortgages)
– new facilities (main & secondary) recognised at ‘fair value’ at inception
– main facilities reflects the estimated sustainable cashflows such that the main facility is repaid in full
– carrying value of main facilities of €1.7bn with associated contractual secondary facilities of c. €3bn
– €43m recognised in the year on secondary facilities following receipt of additional payments and updated cashflows
42
2016
IssuerAIB Mortgage
Bank
AIB Mortgage
BankAIB
AIB Mortgage
BankAIB
AIB Mortgage
Bank AIB
AIB Mortgage
Bank AIB AIB
AIB Mortgage
Bank
Ratings Baa1/A/A Baa1/A/A B1/BB/BBB Baa1/A/A B1/BB/BBB A3 / A+ / A Ba3/BB/BBB Aa2/AA-/A+ B2/B/BB-B3 (Moody's) /
B- (Fitch)Aa1/AA+/A+
Pricing Date 22-Jan-13 03-Sep-13 20-Nov-13 19-Mar-14 08-Apr-14 27-Jan-15 09-Mar-15 20-Jul-15 19-Nov-15 26-Nov-15 28-Jan-16
Tenor 3.5-year 5-year 3-year 7-year 5-year 7-year 5-year 5-year 10-year Perpetual 7-year
Size €500m €500m €500m €500m €500m €750m €500m €750m €750m €500m €1bn
Reoffer
SpreadMS + 185bps MS + 180bps MS +235bps MS +95bps MS +180bps MS+27bps MS+108bps MS+22bps MS+395bps MS+733.9bp MS+54bps
Coupon2.625%
annually
3.125%
annually
2.875%
annually
2.33%
annually
2.75%
annually
0.625%
annually
1.375%
annually
0.625%
annually
4.125%
annually
7.375% semi-
annual
0.875%
annually
2015
ACS Issuance
January 2015
Senior
Unsecured
March 2015
ACS Issuance
July 2015
Senior
Unsecured
2013 2014
ACS Issuance
September
2013
ACS Issuance
March 2014
Senior
Unsecured
April 2014
ACS Issuance
January 2016
Tier 2
November
2015
AT1
December
2015
ACS Issuance
January 2013
Funding market access
43
AIB segment performance
Contribution statement (€m) Jun-16 Jun-15 Jun-16 Jun-15 Jun-16 Jun-15
Net interest income 685 665 90 104 144 133
Other income 229 231 21 36 40 129
Total operating income 914 896 111 140 184 262
Total operating expenses (389) (379) (60) (54) (211) (192)
Operating profit before provisions 525 517 51 86 (27) 70
Provisions 205 543 14 3 (9) (4)
Bank levies and regulatory fees 0 0 (2) (2) (46)
Other 21 15 3 1
Operating contribution 751 1,075 66 88 (82) 66
Euro Equivalent of AIB UK 84 120
Jun-16 Dec-15 Jun-16 Dec-15 Jun-16 Dec-15
Balance sheet metrics (€bn)
Gross loans 54.4 55.8 8.3 8.4 2.5 2.8
Net loans 49.4 50.1 7.6 7.6 2.5 2.8
Financial Investments (AFS & HTM) 18.3 20.0
NAMA Bonds 3.2 5.6
Customer accounts 50.3 50.2 8.7 8.6 0.7 1.5
AIB Ireland AIB UK (£m)
AIB UK (£m)AIB Ireland
Group & International
Group & International
44
Capital movements H1 2016
The capital position as at 30 June 2016 as outlined above does not include any deduction for future dividends on ordinary shares
Risk Weighted Assets (€m) 30-Jun-16 31-Dec-15
Total Risk Weighted Assets 56,528 58,549
Capital (€m)
Shareholders equity (excluding AT1) 11,851 11,654
Regulatory adjustments (2,526) (2,369)
Common Equity Tier 1 Capital 9,325 9,285
Additional Tier 1 Capital 494 494
Total Tier 2 Capital 1,040 1,269
Total Capital 10,859 11,048
Transitional Capital Ratios
CET1 % 16.5% 15.9%
AT1% 0.9% 0.8%
LT2% 1.8% 2.2%
Total Capital % 19.2% 18.9%
AIB Group - CRD IV Transitional Capital Ratios
Risk Weighted Assets (€m) 30-Jun-16 31-Dec-15
Total Risk Weighted Assets 56,688 59,058
Capital (€m)
Shareholders equity (excluding AT1) 11,851 11,654
Regulatory adjustments (4,311) (3,979)
Common Equity Tier 1 Capital 7,540 7,675
Additional Tier 1 Capital 494 494
Total Tier 2 Capital 850 993
Total Capital 8,884 9,162
Fully Loaded Capital Ratios
CET1 % 13.3% 13.0%
AT1% 0.9% 0.8%
LT2% 1.5% 1.7%
Total Capital % 15.7% 15.5%
AIB Group - Fully loaded Capital Ratios
AIB Group - Shareholders Equity (€m)
Equity - Dec 2015 12,148
Profit 2016 823
Pension deficit change (505)
Other (121)
Equity - June 2016 12,345
less AT1 (494)
Shareholders equity 11,851
45
